Did Pandemic Reshape Supply Lines? Impact of Inflation on Investors

By Blu Putnam, Chief Economist & Erik Norland, Senior Economist, CME Group

High Costs May Hinder Changes to Supply Lines

• Pandemic exacerbated disruption of supply lines that began with US-China trade war.
• A shift in consumer spending during pandemic from goods to services benefited China.
• Diversifying global supply lines optimized for costs could pose financial, logistical challenges.
• Lower corporate profits and higher consumer prices could be a compromise solution.

Inflation Could Flip Stocks-Bonds Correlation

• Ten-year Treasury yields have slipped from 14% in 1980 to 1.6% currently.
• Quantitative easing, improved growth prospects have raised inflation concerns.
• Rising bond yields in March could flip the negative stocks-bonds correlation.
• A positive stocks-bonds correlation could limit portfolio diversification.